Exam Study Guide

Managerial Accounting

A field of accounting that focuses on providing information for internal decision-making rather than for external reporting.

Financial Accounting

The field of accounting that focuses on providing financial information to external parties, such as investors and creditors.

Cost Behaviour

The study of how costs change as the level of business activity changes.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted.

Break-even Point

The level of sales at which total revenues equal total costs, resulting in no profit or loss.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual jobs based on estimated overhead costs and estimated activity levels.

Activity-Based Costing (ABC)

An accounting method that assigns costs to products or services based on the resources they consume.

Target Pricing

Setting a price based on the desired profit margin while considering market conditions.

Variable Costing

An accounting method where only variable production costs are included in product costs.

Absorption Costing

An accounting method that includes all manufacturing costs, both fixed and variable, in the cost of a product.

Capital Budgeting

The process of planning and managing a firm's long-term investments.

Net Present Value (NPV)

The difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity.

Variance Analysis

The process of investigating differences between actual and budgeted performance.

Cash Flow Models

Methods used to evaluate the financial outcomes of capital investments based on expected cash inflows and outflows.